ABAKADA Guro Partylist v. Executive Secretary Sept.

1, 2005
TOPIC: Prohibition against delegation of legislative powers | Criterion of valid delegation
Petitioner: ABAKADA Guro Party List (Formerly Aasjas) Officers Samson S. Alcantara And Ed Vincent S. Albano
Respondent: The Honorable Executive Secretary Eduardo Ermita; Honorable Secretary Of The Department Of Finance Cesar
Purisima; And Honorable Commissioner Of Internal Revenue Guillermo Parayno, Jr
Ponente: Austria-Martinez
Facts: 5 consolidated cases assailing the constitutionality of R.A. No. 9337 (amended the revenue code for increase in taxes; e-vat ) a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, and Senate Bill No. 1950. The Conference Committee
on the Disagreeing Provisions recommended the approval of the bills, and the report was sent to the President on May 24, 2005. It
became RA 9337, to be effective on July 1, 2005. When said date came, the Court issued a temporary restraining order, effective
immediately and continuing until further orders, enjoining respondents from enforcing and implementing the law. There were
complaints that gas prices went up by 10 percent and that electric bills will go up by 10 percent, so the court wanted to clarify the
confusion by means of more detailed implementing rules.
ABAKADA GURO Party List, et al.: petition for prohibition because RA 9337 Section 4 imposes a 10% VAT on sale of goods and
properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or
lease of properties. They also have a proviso authorizing the president to raise the vat to 12 percent on Jan 1 2006 upon
recommendation of the secretary of finance, and upon fulfillment of (i) Value-added tax collection as a percentage of Gross Domestic
Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half percent (1 %).
Sen. Aquilino Q. Pimentel, Jr., et al., - sec 4, 5, 6 the authority of the president to raise the rate amounts to undue delegation of
legislative power, and that it violates due process as it imposes an unfair tax burden on the people in that: (1) the 12% increase is
ambiguous because it does not state if the rate would be returned to the original 10% if the conditions are no longer satisfied; (2) the
rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year; and (3) the increase in the VAT
rate, which is supposed to be an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year,
should only be based on fiscal adequacy. They also say that the standby authority granted to the President by the Bicameral
Conference Committee is a violation of the no-amendment rule upon last reading of a bill laid down in Article VI, Section 26(2) of
the Constitution.
Association of Pilipinas Shell Dealers, Inc., et al. assailed sec 8 and 12: 1) Section 8, amending Section 110 (A)(2) of the NIRC,
requiring that the input tax on depreciable goods shall be amortized over a 60-month period, if the acquisition, excluding the VAT
components, exceeds One Million Pesos (P1, 000,000.00); 2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit
on the amount of input tax to be credited against the output tax; and 3) Section 12, amending Section 114 (c) of the NIRC,
authorizing the Government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final
withholding tax on gross payments of goods and services, which are subject to 10% VAT under Sections 106 (sale of goods and
properties) and 108 (sale of services and use or lease of properties) of the NIRC.
- Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive, excessive, and confiscatory - premised
on the constitutional right of non-deprivation of life, liberty or property without due process of law under Article III, Section 1 of the
Constitution.
According to petitioners, the contested sections impose limitations on the amount of input tax that may be claimed. Petitioners also
argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process
of law. Petitioners further contend that like any other property or property right, the input tax credit may be transferred or disposed
of, and that by limiting the same, the government gets to tax a profit or value-added even if there is no profit or value-added.
Petitioners also believe that these provisions violate the constitutional guarantee of equal protection of the law under Article III,
Section 1 of the Constitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of input tax; or (2) invests
in capital equipment; or (3) has several transactions with the government, is not based on real and substantial differences to meet a
valid classification. Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI, Section 28(1) of
the Constitution, and that it is the smaller businesses with higher input tax to output tax ratio that will suffer the consequences
thereof for it wipes out whatever meager margins the petitioners make.
members of the House of Representatives led by Rep. Francis Joseph G. Escudero - 1)
Sections 4, 5, and 6 of R.A. No. 9337
constitute an undue delegation of legislative power, in violation of Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without jurisdiction in deleting the no pass on provisions present in Senate Bill No.
1950 and House Bill No. 3705; and
3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117, 119, 121, 125,[7] 148, 151, 236, 237 and 288,
which were present in Senate Bill No. 1950, violates Article VI, Section 24(1) of the Constitution, which provides that all appropriation,
revenue or tariff bills shall originate exclusively in the House of Representatives
Governor Enrique T. Garcia - alleging unconstitutionality of the law on the ground that the limitation on the creditable input tax in
effect allows VAT-registered establishments to retain a portion of the taxes they collect, thus violating the principle that tax collection
and revenue should be solely allocated for public purposes and expenditures. Petitioner Garcia further claims that allowing these
establishments to pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the Constitution.
OSG - R.A. No. 9337 is the anchor of the governments fiscal reform agenda. A reform in the value-added system of taxation is the
core revenue measure that will tilt the balance towards a sustainable macroeconomic environment necessary for economic growth.
ISSUES:
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the following provisions of
the Constitution:
a) Article VI, Section 28(1), and b) Article VI, Section 28(2)
- NO
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337,
amending Section 114(C) of the NIRC, violate the following provisions of the Constitution:
a) Article VI, Section 28(1), and b) Article III, Section 1
- NO
Procedural: no violations

1) Bicameral conference committee did not commit grave abuse discretion (although court not generally permitted to rule on matters
involving internal rules of congress) just harmonized the house bills from house and the senate
2) no-amendment rule - refers only to the procedure to be followed by each house of Congress with regard to bills initiated in each of
said respective houses, before said bill is transmitted to the other house for its concurrence or amendment.
3) Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination of Revenue Bills - validity of the amendments
made regarding the NIRC provisions on corporate income taxes and percentage, excise taxes
- the revenue bill exclusively originated in the House of Representatives
APPLICATION:
VAT - a tax on spending or consumption. It is levied on the sale, barter, exchange or lease of goods or properties and services.[8]
Being an indirect tax on expenditure, the seller of goods or services may pass on the amount of tax paid to the buyer,[9] with the
seller acting merely as a tax collector.[10] The burden of VAT is intended to fall on the immediate buyers and ultimately, the endconsumers.
Direct tax - a tax for which a taxpayer is directly liable on the transaction or business it engages in, without transferring the burden to
someone else.[11] Examples are individual and corporate income taxes, transfer taxes, and residence taxes
Previous value-added system of sales taxation
1) cost deduction method payable only by the original sellers
- The single-stage system was subsequently modified, and a mixture of the cost deduction method and tax credit method was
used to determine the value-added tax payable
2) tax credit method - an entity can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its
purchases, inputs and imports.
3) VAT multi-stage tax rate of 0% or 10% on all sales using the tax credit method. EO 273
RA 7716 - Expanded VAT Law
R.A. No. 8241 or the Improved VAT Law
R.A. No. 8424 or the Tax Reform Act of 1997
R.A. No. 9337 as the VAT Reform Act.
On the Bicameral Conference Committee exceeding its authority by
1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in both the House and Senate bills;
3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against the output tax;
4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes in addition to the value-added
tax.
Thus, Article VI, Section 16 (3) of the Constitution provides that each House may determine the rules of its proceedings.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as follows:
Sec. 88. Conference Committee. In the event that the House does not agree with the Senate on the amendment to any bill or
joint resolution, the differences may be settled by the conference committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as much as possible, adhere to and support the House Bill. If
the differences with the Senate are so substantial that they materially impair the House Bill, the panel shall report such fact to the
House for the latters appropriate action.
Sec. 89. Conference Committee Reports. . . . Each report shall contain a detailed, sufficiently explicit statement of the changes in
or amendments to the subject measure. The Chairman of the House panel may be interpellated on the Conference Committee
Report prior to the voting thereon. The House shall vote on the Conference Committee Report in the same manner and procedure as
it votes on a bill on third and final reading.
Rule XII, Section 35 of the Rules of the Senate states:
Sec. 35. In the event that the Senate does not agree with the House of Representatives on the provision of any bill or joint
resolution, the differences shall be settled by a conference committee of both Houses which shall meet within ten (10) days after their
composition. The President shall designate the members of the Senate Panel in the conference committee with the approval of the
Senate.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the changes in, or amendments to
the subject measure, and shall be signed by a majority of the members of each House panel, voting separately.
A comparative presentation of the conflicting House and Senate provisions and a reconciled version thereof with the explanatory
statement of the conference committee shall be attached to the report.
Enrolled bill doctrine - the signing of a bill by the Speaker of the House and the Senate President and the certification of the
Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment. The Court finds no reason to deviate
from the salutary rule in this case where the irregularities alleged by the petitioners mostly involved the internal rules of Congress,
e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not the proper forum for the
enforcement of these internal rules of Congress, whether House or Senate. Parliamentary rules are merely procedural and with their
observance the courts have no concern. (Farias vs. The Executive Secretary)
- But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power to inquire into allegations that,
in enacting a law, a House of Congress failed to comply with its own rules, in the absence of showing that there was a violation of a
constitutional provision or the rights of private individuals. (Arroyo vs. De Venecia)
- Parliamentary rules are merely procedural, and with their observance, the courts have no concern. They may be waived or
disregarded by the legislative body. Consequently, mere failure to conform to parliamentary usage will not invalidate the action
(taken by a deliberative body) when the requisite number of members have agreed to a particular measure. (Osmea v. Pendatun)
- Tolentino vs. Secretary of Finance,[23] the Court already made the pronouncement that [i]f a change is desired in the practice [of
the Bicameral Conference Committee] it must be sought in Congress since this question is not covered by any constitutional provision
but is only an internal rule of each house.
- Even the expanded jurisdiction of this Court cannot apply to questions regarding only the internal operation of Congress, thus, the
Court is wont to deny a review of the internal proceedings of a co-equal branch of government. - [i]f a change is desired in the

practice [of the Bicameral Conference Committee] it must be sought in Congress since this question is not covered by any
constitutional provision but is only an internal rule of each house.
- Nevertheless, just to put minds at ease that no blatant irregularities tainted the proceedings of the bicameral conference
committees, the Court deems it necessary to dwell on the issue. The Court observes that there was a necessity for a conference
committee because a comparison of the provisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the
other, reveals that there were indeed disagreements
(1) what rate of VAT is to be imposed;
(2) whether only the VAT imposed on electricity generation, transmission and distribution companies should not be passed on to
consumers, as proposed in the Senate bill, or both the VAT imposed on electricity generation, transmission and distribution
companies and the VAT imposed on sale of petroleum products should not be passed on to consumers, as proposed in the House bill;
(3) in what manner input tax credits should be limited;
(4) and whether the NIRC provisions on corporate income taxes, percentage, franchise and excise taxes should be amended.
changes:
1) With regard to the disagreement on the rate of VAT to be imposed, it would appear from the Conference Committee Report that the
Bicameral Conference Committee tried to bridge the gap in the difference between the 10% VAT rate proposed by the Senate, and
the various rates with 12% as the highest VAT rate proposed by the House, by striking a compromise whereby the present 10% VAT
rate would be retained until certain conditions arise, i.e., the value-added tax collection as a percentage of gross domestic product
(GDP) of the previous year exceeds 2 4/5%, or National Government deficit as a percentage of GDP of the previous year exceeds 1
%, when the President, upon recommendation of the Secretary of Finance shall raise the rate of VAT to 12% effective January 1, 2006.
2) With regard to the disagreement on whether only the VAT imposed on electricity generation, transmission and distribution
companies should not be passed on to consumers or whether both the VAT imposed on electricity generation, transmission and
distribution companies and the VAT imposed on sale of petroleum products may be passed on to consumers, the Bicameral
Conference Committee chose to settle such disagreement by altogether deleting from its Report any no pass-on provision.
3) With regard to the disagreement on whether input tax credits should be limited or not, the Bicameral Conference Committee
decided to adopt the position of the House by putting a limitation on the amount of input tax that may be credited against the output
tax, although it crafted its own language as to the amount of the limitation on input tax credits and the manner of computing the
same by providing thus:
(A) Creditable Input Tax. Provided, The input tax on goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of
acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT
component thereof, exceeds one million Pesos (P1,000,000.00): PROVIDED, however, that if the estimated useful life of the
capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such
shorter period: . . .
(B) Excess Output or Input Tax. If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall
be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters: PROVIDED that the input tax inclusive of input VAT carried over from the previous quarter
that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: PROVIDED, HOWEVER, THAT
any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against
other internal revenue taxes, . . .
4) With regard to the amendments to other provisions of the NIRC on corporate income tax, franchise, percentage and excise taxes,
the conference committee decided to include such amendments and basically adopted the provisions found in Senate Bill No. 1950,
with some changes as to the rate of the tax to be imposed.
the Bicameral Conference Committee is mandated to settle the differences between the disagreeing provisions in the House bill and
the Senate bill. The term settle is synonymous to reconcile and harmonize.
(a) adopt the specific provisions of either the House bill or Senate bill,
(b) decide that neither provisions in the House bill or the provisions in the Senate bill would be carried into the final form of the bill,
and/or
(c) try to arrive at a compromise between the disagreeing provisions.
- it did not inject any idea or intent that is wholly foreign to the subject embraced by the original provisions
- stand-by authority to raise 10 12 percent - compromise to try to bridge the difference in the rate of VAT proposed by the two
houses of Congress. Nevertheless, such compromise is still totally within the subject of what rate of VAT should be imposed on
taxpayers.
- no pass-on provision was deleted. The VAT is an indirect tax. It is a pass on-tax. And lets keep it plain and simple. Lets not confuse
the bill and put a no pass-on provision.
- amount of input tax to be credited against output tax, - came to a compromise on the percentage rate of the limitation or cap on
such input tax credit, but again, the change introduced by the Bicameral Conference Committee was totally within the intent of both
houses to put a cap on input tax that may be redited against the output tax.
(Definition from another webstite - Here in the Philippines, we are required to include VAT to our sales and pass it on to the customer,
generally. We are, therefore, required to remit this VAT (equivalent to 12%) to the Bureau of Internal Revenue (BIR). That is your
Output VAT. However, during the course of business, we also incur some expenses. That means VAT was passed on to us already. That
is your Input VAT. So to make things even simpler, Output VAT comes from your revenues, while Input VAT comes from your expenses.
Tax payable is equivalent to Output VAT minus Input VAT.)
- within the power of a conference committee to include in its report an entirely new provision that is not found either in the House bill
or in the Senate bill. If the committee can propose an amendment consisting of one or two provisions, there is no reason why it
cannot propose several provisions, collectively considered as an amendment in the nature of a substitute, so long as such
amendment is germane to the subject of the bills before the committee. After all, its report was not final but needed the approval of
both houses of Congress to become valid as an act of the legislative department.
Does Not Violate Article VI, Section 26(2) of the Constitution on the No-Amendment Rule

- Article VI, Sec. 26 (2) of the Constitution, states:

No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof
in its final form have been distributed to its Members three days before its passage, except when the President certifies to the
necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto
shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal.
- refers only to the procedure to be followed by each house of Congress with regard to bills initiated in each of said respective
houses, before said bill is transmitted to the other house for its concurrence or amendment.
- absurd to have a bicam committee and prohibit amendments; the other house of Congress would be deprived of its constitutional
power to amend or introduce changes
Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination of Revenue Bills - validity of the
amendments made regarding the NIRC provisions on corporate income taxes and percentage, excise taxes
- Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from the House some originated from
the senate amendments - a violation of Article VI, Section 24 of the Constitution (All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application, and private bills, shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.)
- Tolentino case - it is not the law but the revenue bill which is required by the Constitution to originate exclusively in the House
of Representatives. It is important to emphasize this, because a bill originating in the House may undergo such extensive changes in
the Senate that the result may be a rewriting of the whole. . . . At this point, what is important to note is that, as a result of the
Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill which initiated the legislative
process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senates
power not only to concur with amendments but also to propose amendments. It would be to violate the coequality of legislative
power of the two houses of Congress and in fact make the House superior to the Senate.
- Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills
which are required by the Constitution to originate in the House. The members of the House can be expected to be more sensitive to
the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same
problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.
- the sections introduced by the Senate are germane to the subject matter and purposes of the house bills, which is to supplement
our countrys fiscal deficit, among others. Thus, the Senate acted within its power to propose those amendments.
SUBSTANTIVE ISSUES
A. No Undue Delegation of Legislative Power
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the Constitution: Article VI,
Section 28(1) and 2
- SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as follows:
Value-Added Tax on Sale of Goods or Properties.
(A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties,
a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold,
bartered or exchanged, such tax to be paid by the seller or transferor: provided, that the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth
percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %).
SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten
percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties,
excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody:
Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax
shall be based on the landed cost plus excise taxes, if any: provided, further, that the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth
percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %).
SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties
(A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of
gross receipts derived from the sale or exchange of services: provided, that the President, upon the recommendation of the Secretary
of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following
conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth
percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). (Emphasis
supplied)
Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is a virtual abdication by Congress
of its exclusive power to tax because such delegation is not within the purview of Section 28 (2), Article VI of the Constitution, which
provides:

The Congress may, by law, authorize the President to fix within specified limits, and may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the
government.
principle of non-delegation of powers
- potestas delegata non delegari potest which means what has been delegated, cannot be delegated.
- as delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another
- The powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative.
Purely legislative power, which can never be delegated, has been described as the authority to make a complete law complete as to
the time when it shall take effect and as to whom it shall be applicable and to determine the expediency of its enactment. . It is the
nature of the power, and not the liability of its use or the manner of its exercise, which determines the validity of its delegation.
exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the
delegate;[41] and (b) fixes a standard the limits of which are sufficiently determinate and determinable to which the delegate
must conform in the performance of his functions. A sufficient standard is one which defines legislative policy, marks its limits, maps
out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is
to be effected. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to
step into the shoes of the legislature and exercise a power essentially legislative.
- The true distinction, says Judge Ranney, is between the delegation of power to make the law, which necessarily involves a
discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance
of the law. The first cannot be done; to the latter no valid objection can be made.
The power to ascertain facts is such a power which may be delegated. There is nothing essentially legislative in ascertaining the
existence of facts or conditions as the basis of the taking into effect of a law. That is a mental process common to all branches of the
government.
- the legislature, as it is its duty to do, determines that, under given circumstances, certain executive or administrative action is to be
taken, and that, under other circumstances, different or no action at all is to be taken. What is thus left to the administrative official is
not the legislative determination of what public policy demands, but simply the ascertainment of what the facts of the case require to
be done according to the terms of the law by which he is governed. The efficiency of an Act as a declaration of legislative will must, of
course, come from Congress, but the ascertainment of the contingency upon which the Act shall take effect may be left to such
agencies as it may designate. The legislature, then, may provide that a law shall take effect upon the happening of future specified
contingencies leaving to some other person or body the power to determine when the specified contingency has arisen.
The legislative does not abdicate its functions when it describes what job must be done, who is to do it, and what is the scope of his
authority.
- While the power to tax cannot be delegated to executive agencies, details as to the enforcement and administration of an exercise
of such power may be left to them, including the power to determine the existence of facts on which its operation depends.
- the preliminary ascertainment of facts is not a legislative function but simply ancillary to legislation
- The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which
enforcement and administration of the increase rate under the law is contingent. No discretion would be exercised by the President.
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions
specified by Congress. This is a duty which cannot be evaded by the President.
- Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by December
31, 2005, the value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and fourfifth percent (24/5%) or the national government deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1%) There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is
constitutionally permissible
B. The 12% Increase VAT Rate Does Not Impose an Unfair and Unnecessary Additional Tax Burden
- Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions set forth therein are satisfied, the
President shall increase the VAT rate to 12%. It does not provide for a return to the 10% rate nor does it empower the President to so
revert if, after the rate is increased to 12%, the VAT collection goes below the 24/5 of the GDP of the previous year or that the
national government deficit as a percentage of GDP of the previous year does not exceed 1%. There is no basis for petitioners fear
of a fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the conditions provided in
Sections 4, 5 and 6 are no longer present.
- VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have economic or fiscal meaning. If VAT/GDP is less than 2.8%, it means that
government has weak or no capability of implementing the VAT or that VAT is not effective in the function of the tax collection.
Therefore, there is no value to increase it to 12% because such action will also be ineffectual.
Natl Govt Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP is 1.5% or less means the fiscal condition of government has reached a
relatively sound position or is towards the direction of a balanced budget position. Therefore, there is no need to increase the VAT rate
since the fiscal house is in a relatively healthy position. Otherwise stated, if the ratio is more than 1.5%, there is indeed a need to
increase the VAT rate.[62]
It simply means that sources of revenues must be adequate to meet government expenditures and their variations.
- 90 percent of our revenue is used for debt service. Our debt to GDP is approximately equal to our GDP. Again, that shows you that
this is not a sustainable situation.

- So given this situation, we at the Department of Finance believe that we really need to front-end our deficit reduction. Because it is
deficit that is causing the increase of the debt and we are in what we call a debt spiral. The more debt you have, the more deficit you
have because interest and debt service eats and eats more of your revenue. We need to get out of this debt spiral. And the only way,
I think, we can get out of this debt spiral is really have a front-end adjustment in our revenue base.
- The image portrayed is chilling. Congress passed the law hoping for rescue from an inevitable catastrophe. Whether the law is
indeed sufficient to answer the states economic dilemma is not for the Court to judge.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending
Section 114(C) of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
- The doctrine is that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but
rather broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a
showing, the presumption of validity must prevail.
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the amount of input tax that may be credited
against the output tax. It states, in part: [P]rovided, that the input tax inclusive of the input VAT carried over from the previous
quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT:
-i nput Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax due from or paid by a VAT-registered
person on the importation of goods or local purchase of good and services, including lease or use of property, in the course of trade
or business, from a VAT-registered person, and Output Tax is the value-added tax due on the sale or lease of taxable goods or
properties or services by any person registered or required to register under the law.
- Petitioners claim that the contested sections impose limitations on the amount of input tax that may be claimed. In effect, a portion
of the input tax that has already been paid cannot now be credited against the output tax.
- to the extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still creditable. More importantly,
the excess input tax, if any, is retained in a businesss books of accounts and remains creditable in the succeeding quarter/s. This is
explicitly allowed by Section 110(B), which provides that if the input tax exceeds the output tax, the excess shall be carried over to
the succeeding quarter or quarters. Section 112(B) allows a VAT-registered person to apply for the issuance of a tax credit certificate
or refund for any unused input taxes, to the extent that such input taxes have not been applied against the output taxes. unused
input tax may be used in payment of his other internal revenue taxes.
First, if at the end of a taxable quarter the output taxes charged by the seller are equal to the input taxes that he paid and passed on
by the suppliers, then no payment is required;
Second, when the output taxes exceed the input taxes, the person shall be liable for the excess, which has to be paid to the Bureau of
Internal Revenue (BIR);[69] and
Third, if the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the
input taxes result from zero-rated or effectively zero-rated transactions, any excess over the output taxes shall instead be refunded to
the taxpayer or credited against other internal revenue taxes, at the taxpayers option. a person can credit his input tax only up to
the extent of 70% of the output tax.
- The input tax is not a property or a property right within the constitutional purview of the due process clause. A VAT-registered
persons entitlement to the creditable input tax is a mere statutory privilege. The state may change or take away rights, which were
created by the law of the state, although it may not take away property, which was vested by virtue of such rights
Taxation is progressive when its rate goes up depending on the resources of the person affected
- DISCONTINUED DUE TO TAX ISSUES DISCUSSED

WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461, 168463, and
168730, are hereby DISMISSED.
There being no constitutional impediment to the full enforcement and implementation of R.A. No. 9337, the temporary restraining
order issued by the Court on July 1, 2005 is LIFTED upon finality of herein decision.